Will BAE Systems shares soar with its foray into the ‘space industry’?

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Many look at the shifting billions in government defence budgets as the primary reason for the rise in BAE Systems (LSE: BA.) shares. And I can hardly argue. The rise of the share price – up 303% in five years – has a lot to do with massive changes in military spending.

But the reason this company has been able to really take advantage is simple – because they make some of the best stuff going. Be it fighters jets, submarines, or cybersecurity, BAE Systems is on the cutting edge of the latest technology. And that’s why the recent announcement of the Ascent spacecraft line intrigued me. Could a foray into the nascent field of space defence send the stock soaring even higher?

What is Ascent?

So what exactly is this new piece of kit? Essentially, it’s a vehicle for delivering payload to space. This could be putting small satellites into orbit where they can be used for military purposes. It can also be used for shifting satellites between orbits. The long-term goal is to be able to take stuff to and bring stuff back from the moon.

Perhaps the best way to explain the importance of this kind of application is through the conflict in Ukraine. Starlink technology has been vital to operations in the war. Coordinating satellite information with high-tech drones is valuable to both sides. The recent blocking of all Starlink devices on the Russian side has severely hampered activities on that end. The last few years have shown how important the dynamic use of these kinds of technology is in modern warfare.

It’s worth pointing out at this stage that investors may not feel comfortable here. This is a company that makes a profit from producing and selling weapons. I think it’s understandable for anyone to have any qualms about this as an investment decision.

Is the stock a buy?

How much impact could this have on the company? Well, it’s still in the early stages. No numbers are being thrown around just yet. The firm expects to release the ‘test version’ of the Ascent spacecraft in 2027, however, so it’s not too long to wait. It’s also worth bearing in mind that a growth story can affect a company’s share price long before the money starts rolling in. Just look at the change in Rolls-Royce shares along with the developments in its SMRs (small nuclear power plants) for evidence of that.

And I think all BAE Systems shareholders will like the move towards the growing space industry. Later this year, the IPO of SpaceX will take place with a valuation of $2trn. I think that shows just how big this sector could become. It’s perhaps also encouraging that as well as the Military Space division, BAE Systems has a Civil Space division for non-defence applications.

To sum up? The announcement of these new Ascent spacecraft could end up as one of those small announcements that is a sign of a big impact over the long run. I think the stock is worth considering.

The post Will BAE Systems shares soar with its foray into the ‘space industry’? appeared first on The Motley Fool UK.

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John Fieldsend has positions in BAE Systems and Rolls-Royce Plc. The Motley Fool UK has recommended BAE Systems and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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